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> the solution to negative externalities is always the same Not really. There are lots of actions that have negative externalities and which we choose to treat
by throwawaygh 6y ago
> the solution to negative externalities is always the same
Not really. There are lots of actions that have negative externalities and which we choose to treat differently. E.g., consider drug abuse, financial fraud, violent crime. We do not attenuate the incidence rate of these behaviors using the tax code.
The idea of using the tax code to shape behavior by manipulating market forces is relatively new and has a mixed track record.
This is true even market-based solutions to decarbonization. E.g., "cap & trade" crucially includes a "cap" that has to be enforced one way or another.
- CarelessExpert 6y ago> Not really. There are lots of actions that have negative externalities and which we choose to treat differently. E.g., consider drug abuse, financial fraud, violent crime. We do not attenuate the incidence rate of these behaviors using the tax code. I'm specifically talking about directing behaviours that remain legal. I don't expect governments around the world are gonna ban the F-150. As for things like cap and trade, you're right, that's an alternative mechanism. At bottom it's the same, though: assign an economic cost to the behaviour, and then use the market system to manage the behaviour. Still, your point is well taken!